Thursday, September 06, 2012

A Draghi Kind of Day

by Calculated Risk on 9/06/2012 04:15:00 PM

First, Tim Duy models a few employment indicators Fed Watch: Quick Employment Report Preview

The model forecasts a nonfarm payroll gain of 198k for August. To be sure, the standard error of 88k is large in terms of payroll forecasts; I wouldn't be surprised by anything between 110k and 290k. That said, the current consensus is 125k with a range of 70k to 177k, which seems low to me.
And a few articles on the ECB:

From the NY Times: Central Bank to Snap Up Debt, Saying, ‘Euro Is Irreversible’
Mario Draghi, the E.C.B. president, overcame objections by Germany and won nearly unanimous support from the bank’s board for a program of buying government bonds that would effectively spread responsibility for repaying national debts to the euro zone countries as a group.

The E.C.B. will buy bonds on open markets, without setting any limits, of countries that ask for help, which Spain is expected to do. The E.C.B. said it would act only after countries agreed on conditions with the euro zone rescue fund, which will be known as the European Stability Mechanism. The E.S.M. would buy bonds directly from governments, taking responsibility for imposing the conditions, while the E.C.B. would intervene in secondary markets.

The bank and its president, Mr. Draghi, have had the quiet support of all European leaders in taking this latest bold action ... Crucially, support for Mr. Draghi includes Berlin and the German chancellor, Angela Merkel.
From the WSJ: ECB Unveils Bond-Buying Program

From the Financial Times: Draghi outlines bond buying plan

And some in-depth analysis at Alphaville including OMT! and Seniority, the SMP, and the OMT
Here are the full ‘technical features’, which Mario Draghi read out at Thursday’s press conference. Three big things stick out:

- The ECB will apparently make a ‘legal act’ to confirm that its bond holdings under “Outright Monetary Transactions” are pari passu, not senior. ...

- The ECB will relax collateral requirements ... That’s a big, big move for Spanish banks in particular ...

- Conditionality. A slight chink? The ECB could buy bonds under an EFSF-ESM precautionary credit line for a sovereign, short of a maximal full bailout. Here’s the EFSF’s guidelines on the conditions of precautionary credit lines, for example.
Much more at Alphaville.